Barry Neilson, chief customer officer of the Nucleus platform, expects a two-tier platforms market to emerge over the next decade.
He said platforms began essentially as investment and tax product providers, offering wrappers and investment products.
While Mr Neilson said platforms operating with that business model would continue to exist in the years to come, he thought others would emerge that would be more integrated in the advice process.
He said: “That [first] model, will be quite low margin but writing a high volume of business, providing investment solutions and will probably have a profit margin of about 10 basis points, and those firms will try to grow by providing things such as model portfolios services.
"The other type of platform, which is what I think Nucleus is becoming, will be part of the advice and financial planning process.
"It will be about providing infrastructure to help the adviser save time on administrative tasks, and this will be a higher margin business, at maybe 20 or 30 basis points.”
The Nucleus platform had assets under management of £16.1bn at the end of December 2019.
The company’s inflows have been dented by consolidation in the advice market as some of its adviser clients got acquired by a larger firm and moved the assets as a result.
Mr Neilson said history showed the advice market went through waves during which smaller firms were acquired by larger firms and then this stopped again.
He said: “I am in this industry for just coming up to 30 years, and throughout that time there have always been people saying that the smaller advice firm is dying and there won’t be any around in future, but that has never happened.”
Mr Neilson said technology would play an ever increasing role in advice businesses because it will make firms more efficient, meaning less time for the adviser to spent on administrative tasks and more time to see clients.
He said: “We know advisers for example might use one system for risk profiling and a different one for cash flow modelling, making those systems talk to each other saves the adviser a lot of time, as it automates a process that would otherwise have to be done by the adviser manually. That’s an example of the sort of thing I think helps advisers be more efficient.”
The trend of platforms targeting certain parts of the market has already begun, with Transact founder Ian Taylor stating in September that his firm “is not interested” in clients with smaller pots of assets, and also that he doesn’t anticipate his firm moving into providing products such as model portfolio services.
Last May the Lang Cat warned platforms were not innovating enough and this was failing clients. For instance they were restricting drawdown clients' ability to receive income.
david.thorpe@ft.com
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